Development of MFIs crucial to financial inclusion: Panellists at VCCircle summit
Nov 29, 2017
The opportunity is enormous, given as much as 40% of the country’s population is financially underserved. Sunish Sharma, managing partner at private equity firm Kedaara Capital Advisors LLP, said MFIs as a business have the ability to make money. Kedaara’s existing portfolio has names like Jaipur-based Au Small Finance Bank, housing finance firm Aavas Financiers Ltd, and rural-focussed microfinance company Spandana Sphoorty Financial Ltd.
“Indian banks have been acquiring MFIs. It will enable banks to offer multiple products, besides basic services. But the bigger question is, will banks be able to make money given the strict cost structure under which they operate?” Sharma said. MFIs acquired by banks are likely to operate as subsidiaries, he added. Earlier this week, private-sector lender RBL Bank Ltd raised its stake in financial product distribution subsidiary Swadhaar FinServe Pvt. Ltd to 60.48% from 58.4%. RBL is one of the several commercial banks that are increasingly looking at acquiring companies in the financial services segment. Harjeet Toor, business head – retail & small business lending, credit cards and financial inclusion at RBL Bank, said MFIs need to be geographically widespread to have stability since the business experiences a crisis every three to four years. At the same time, deeper penetration was on the cards, Toor said. “About 75% of the MFI business is under banks,” he added. Besides, monetisation of credit and telecom data will hasten the evolution of business models. “There is immense richness in what telecom data has to offer. There is superb opportunity for whoever leverages it,” said Rohit Krishna, senior vice president and chief of commercial and market development, Vodafone. However, financial inclusion initiatives need to be carried out with extreme responsibility in the light of customer vulnerability and security risks, he added. Like this report? Sign up for our daily newsletter to get our top reports.